Increasing Your Success with Collection Calls
Calling a customer and reminding them of past due invoices is a task most people don’t look forward to tackling. Being the “bearer of bad news” is not a role anyone enthusiastically accepts. It is, however, a necessary task to ensure a predictable and steady cash flow for the organization. Below are some tips to help increase your success with making these calls.
Ensure you are working with a “good” aging. Make sure you have the most current aging before making any calls and that it’s accurate. A good double-check is comparing the total balance of the aging to the accounts receivable balance on the balance sheet. In theory, they should match. If they don’t, your aging could be missing an invoice or a payment. This situation does happen so this is one step you shouldn’t skip. If you don’t have access to financials or the general ledger, consult with someone who does.
Do your research. Examine the invoice or invoices in question and understand what products or services the customer purchased. Also, review the customer’s purchase and payment history to determine if there is a pattern. Make note if the customer historically pays on time or not and how often purchases are made. Finally, if a salesperson is associated with the customer, it’s prudent to get feedback from him or her. It’s amazing what salespeople know, so they are an excellent resource to develop a deeper understanding of the customer and also who best to contact. Oftentimes, the salesperson will make the collection call for you BECAUSE of the relationship he or she has with the customer that you might not.
Approach the call with a collaborative mindset. Once you’re connected to the right person, make a proper introduction and extend the appropriate courtesies. Example: “Hi Dave, this is John from Acme Company here in Phoenix. How are you today?” There’s no harm in small talk if the customer feels like chatting for a few minutes. If the reply is short and succinct, skip it. Either way, it’s time to present the situation at hand. Example: “I was reviewing Jones Company’s account today and noticed there were a couple past due invoices. I first wanted to make sure you received them.” This is where the collaboration comes in. You’re not accusing anyone of any wrongdoing. In fact, you’re framing yourself in a helpful light. Sometimes, for some reason, invoices don’t reach the customer. If that’s the case, resend the invoices, receive confirmation back from the customer that they’ve received them, and the issue is more than likely resolved. The confirmation part is crucial because customers can use the “I didn’t get the invoice” excuse as a stalling tactic as well.
What if the customer has the invoices? The decision tree in this situation can branch out in several directions. Let’s start out with assumption that the customer has a good payment history:
There might be a problem with the specific products or services. It’s time to be collaborative again. Example: “Oh great, you have them. Jones Company always pays on time so I was concerned. Are there any issues with the goods or services that’s preventing payment?” The person you’re talking to might not immediately know the answer depending on the size and structure of the company. Research might need to be done and multiple phone conversations will be needed at that point. Most companies want to pay their bills and if they don’t, there’s typically a good reason. Bad products or services is definitely a reason. If that’s the case, you might need to get other people in your organization involved to rectify the complaint.
What if the customer doesn’t have an issue with the products or services? There could be other problems, like sluggish cash flow, that could be preventing an otherwise good customer from paying on time. At this point, just ask if the past due invoices are going to get paid. Example: “I’m glad there were no issues with the product. The terms are 30 days and this invoice is at 45 right now. When do you think this will be scheduled for payment?” If you suspect or know that finances are tight, offer a payment plan if you’re permitted to offer it. Give as many solutions as possible. When a person feels like he or she has choices, you’ll get a higher level of cooperation.
What about customers who chronically pay late? Customers who chronically pay late are the biggest challenge and there could be a myriad of reasons as to why they pay late. It could range anywhere from disorganization to poor cash flow management to being short-staffed. The key is to determine what the reason is, which usually requires having a frank conversation with the customer. As stated before, most companies do want to pay their bills. If the reason for their late payment habits is something that’s fixable, ask if there’s any way you can help. Offer to call once a week or e-mail them an updated aging every time a new invoice is generated. It’s a little more work on your end, but that extra work could equal faster payment.
You might have a deadbeat customer. It happens. If you’ve explored all avenues and felt like you’ve done everything you can to work with the customer, it might be time to recommend to management to either limit the customer’s purchasing ability or sever the relationship. Compile your notes so you can justify your recommendation. Stay objective. There could be reasons behind the relationship that you’re not aware of.
Finally, review the customer application process. Sometimes the customer application process, or lack thereof, lends itself to the collection issues an organization has. Are credit checks run on prospective customers? Are credit checks rerun annually to ensure the customer is still in good standing? Does your organization require written agreements with customers with terms clearly outlined in the agreement? How are credit limits determined? If you aren’t involved in this process, get involved or at least familiar with it. Ask questions. Collaborate with your coworkers. Being proactive and ensuring the organization has a comprehensive and systematic customer application process can decrease potential collection issues.
For brevity’s sake, not every situation can be addressed here. If you, however, approach collection calls with a collaborative mindset and view them as a fact-finding mission rather than a confrontation, your customers will be more poised to collaborate in return.